The ECB can only tighten its monetary policy gradually

The ECB has chosen a gradual and cautious exit from its expansionary monetary policy stance. The decision gives the ECB a maximum of flexibility for exiting QE. I expect the ECB to terminate its QE program after September 2018 and to raise rates for the first time in 2019 at the earliest. The ECB can tighten policy only gradually as it is only slowly approaching its price stability mandate. The ECB has to maintain a high degree of flexibility in managing the exit from its expansionary monetary policy stance as risks to the economy and financial markets remain substantial. Geopolitical crises, protectionism, Brexit and the weakness of many banks worldwide could threaten the economic recovery in Europe. We have reached a monetary turning point, but this does not imply a fast normalization of interest rates. The monetary policy of ECB is one of the most important reasons for the economic recovery in Europe and Germany’s strong economy. Without low interest rates, the new German government would not have the fiscal surpluses it obviously plans to distribute to its citizens via tax cuts.